Absolute Advantage Vs Comparative Advantage

January 15, 2021

Two countries produce two different items, root beer and cheese. The table below shows the amounts of each commodity that each country can produce with 600 units of factor inputs (productive units). Consumption in each country is equal to production – that is, if trade is warranted, citizens need to receive at least as much root beer and cheese as they started with before trade. Given the following production levels, calculate the best possible trading scenario that maximizes global welfare. Remember each country has 600 productive units which they can use in any combination. Before trade, each country has allocated 50% of their productive units to each product. That is, before trade, Hokieland makes 150 gallons of root beer and 60 wheels of cheese. What should each country do if they trade? [be careful, you need to make at least as much after trade as you had before trade.] Explain your solution. Use this example to clearly explain the difference between Absolute and Comparative advantage.

	Hokieland	Eagleland
Root Beer	2 units per gallon	4 units per gallon
Cheese	5 units per wheel	8 units per wheel

Grading Rubric

Your essay will be graded based on the following rubric:

Category	Unacceptable (0-1)	Needs Improvement (2-3)	Good (4)	Excellent (5)	Total Possible Points

Organization (x3)	There is no apparent organization to the essay. It shows some coherence but ideas lack unity.	There is some level of organization though digressions, ambiguities, irrelevance are too many. Transition evident but not used throughout essay.	Essay is coherent and logically organized with transitions used between ideas and paragraphs to create coherence. Overall unity of ideas is present.	Essay shows high degree of attention to logic and reasoning of points. Unity clearly leads the reader to the conclusion and stirs thought regarding the topic.	15
Content (x3)	Essay lacks evidence of critical thinking. Uses superficial, simplistic, or irrelevant reasons and unjustifiable claims. Makes illogical, inconsistent inference.	Essay is primarily opinion without valid support. Little critical thinking is evident. Follows existing evidence to obtain conclusions.	Ideas are logical and reasoned, but demonstrate lesser degree of originality. Follows evidence and reason lead to obtain justifiable, logical conclusion.	Writer develops logical and reasoned independent ideas that go beyond predictable outcomes or the conclusions of researched materials. Follows where evidence and reason lead in order to obtain defensible, thoughtful, logical conclusions or solutions.	15
Grammar & Mechanics(x2)	Sentences are unclear and many grammatical errors in structure make essay virtually unreadable. Spelling, punctuation, capitalization, and vocabulary usage contain major flaws that impede readability.	Most spelling, punctuation, and grammar correct allowing reader to progress through essay. Some errors remain.	Essay has few spelling, punctuation, and grammatical errors allowing reader to follow ideas clearly. Very few fragments or run-ons.	Essay is free of distracting spelling, punctuation, and grammatical errors; absent of fragments, comma splices, and run-ons.	5